Louisiana Supreme Court Declines to Interpret Louisiana Valued Policy Law
July 21, 2008
The anticipation of a significant statutory interpretation growing out of hurricane claims in Louisiana was met with disappointment as the Louisiana Supreme Court declined to address whether Louisiana's Valued Policy Law ("VPL") requires an insurer to pay policy limits if part of a total loss is due to a non-covered peril. Landry v. Louisiana Citizens Property Insurance Company, 983 So.2d 66 (La. 2008).
The insured's home was a total loss following Hurricane Rita, allegedly from a combination of wind and flooding. The insured's homeowners' policy covered wind losses but excluded flood losses. Invoking the VPL, La. R. S. 22:695, the insureds sought policy limits, arguing that the VPL requires payment of policy limits even if part of the total loss is due to a covered peril (wind) and part to a non-covered peril (flood). The trial court granted summary judgment to the insureds, holding the insurer liable for the full value of the policy. The insurer appealed, arguing (1) that the trial court had incorrectly applied the VPL to a total loss caused in part by a covered peril and in part by a non-covered peril; and (2) that it had validly exercised the option to have valuation by an alternative method to that in the VPL.
The court of appeal essentially agreed with the insurer's position and reversed the partial summary judgment and remanded the case for trial, imposing the burden of proof on the insurer to show that flood (an excluded peril) was the "efficient or proximate cause" of the total loss of the home. It interpreted the VPL to be a valuation statute rather than a causation statute, stating that the VPL "simply fixes a value an insurer must pay in the event a structure is deemed a total loss and a factual determination has been made that the total loss was caused by a specified peril defined in the insurance contract." It gave only very brief mention to the "alternate valuation" argument.
However, the Supreme Court concluded that the exercise of the "alternate valuation" option rendered the valuation method outlined in the VPL irrelevant, and declined to consider the meaning and effect of the statutory valuation method. For the same reason, the Supreme Court also declined to decide whether the VPL applies only to "fire policies" (the statutory term) or whether it also applies to homeowners' policies which contain fire coverage. The Supreme Court vacated that portion of the court of appeal's opinion addressing the meaning of the statute. This disposition officially leaves that issue open at the Supreme Court, while the vacating of that portion of the intermediate appellate opinion leaves the issue open at that level as well.
